Every parent treasures the feeling of holding their newborn for the first time. The little fingers clutching yours, the snuggles, the first smile, the first words – those moments are priceless. While the joy of having a child is unparalleled, raising a child and providing him/her a good life costs a lot of money. To give a rough estimate, based on a study on the costs incurred by a couple to raise a child in today’s time, raising a child up to the age of 17 will take approximately Rs 42 lakh as of today. Yes Rs 42 lakh! Note that while this amount includes the lifestyle expenses, school fees and other miscellaneous expenses, we haven’t even looked at major expenses that typically come later in the child’s life like higher education and marriage costs.
This amount is not only meant to be an eye opener for couples looking to start their own families, but also a reminder to young individuals starting off their careers to keep in mind the costs involved when one has his/her own family. This highlights the need to plan your finances keeping in mind your goals as an individual and your goals as a family.
The most important aspect that must be considered before starting a family is to have a chat with your spouse and understand if you are ready to bear the costs of having and raising a child. You should have an idea of how your finances will be impacted if either of the spouse takes a break during the pregnancy or after the birth.
Let’s take a look at the expenses a parent usually encounters in the different stages of bringing up a child – from birth to the time he or she flies off the nest.
Pre-natal and pregnancy expenses
During the pregnancy phase, as a couple, you should be prepared financially for prenatal care and charges involved during the delivery of the child. Once the child is born, there are innumerable expenses like clothes for ever-growing children, diapers, toys, baby products and food. These recurring costs may not look big taken alone, but over a period they will significantly impact your family’s budget.
In this phase it is important to stick to a budget and not indulge in too many impulse purchases of toys and clothes for your children. More importantly, start saving and investing towards your child’s goals. Be it your child’s education or marriage, prepare an estimate of how much you would require for each goal and start saving and investing towards these goals from the beginning. Investing in mutual funds through monthly SIPs from the time of the child’s birth can help build a sizable corpus for the child’s education or marriage.
It is also advisable to make a contingency fund. If you don’t already have a “rainy day fund,” now’s the time to anticipate some emergencies for your family. Having at least three to six months’ worth of living expenses covered is a great place to start.
Expenditure on schooling
Today, school fees and other extra-curricular expenses have skyrocketed. Annual school fees add up to Rs 1-1.5 lakh in good schools in the metros. In addition, there will be various other expenses like costs for extracurricular activities and art and sports classes, spends on entertainment, dining out, family outings and sports, game equipment purchases.
In this phase, had you been saving and investing for the child’s goals from the beginning you would be thanking your stars. You should continue saving and investing regularly towards the child’s higher education and marriage. You must also keep in mind your own retirement and you must not only invest for the child’s future, but also start investing in such a way as to build a sizeable corpus for your retirement. You must factor in inflation while investing for your retirement or your child’s goals. Taking into consideration inflation will help you get a better understanding of how much your monthly expenses once you retire or your child’s higher education, will cost in the future. Planning in advance is the only way to ensure you can achieve such goals, without breaking the bank as most of these expenses are unavoidable.
Expenditure on higher education and marriage
Higher education and marriage are both big expenses when it comes to a family’s expenditure.
While these expenses, which could cost up to Rs 50 lakh or more, can seem overwhelming, with early planning these goals can be achieved easily, without you having to compromise tremendously on your present lifestyle. By starting investments early, even if in small amounts initially, you can reach the planned amount for your child’s bright and happy future.
What is most important while preparing for goals when it comes to your children, is the discipline to stick to priorities and a strategy. You must plan for all the goals of your child and start investing towards these goals in a consistent manner. This will ensure you can provide your child with the bright future you envision for him/her and provide your family a carefree financial future.
(By Amar Pandit, CFA, and the Founder & Chief Happyness Officer at HappynessFactory.in)